Paul Krugman thinks the foundering economy may right itself this summer, he said in a speech today in London. Evidently, investors agree. Not long after the Nobel laureate and New York Times columnist made his prediction, stocks surged.
"I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer," Krugman said in a lecture at the London School of Economics, according to Bloomberg News. "Things seem to be getting worse more slowly. There's some reason to think that we're stabilizing."
This isn't the first time Krugman has predicted the recession's end from the lectern. At a seminar in Abu Dhabi a few weeks ago, he said the world economic would resume its growth before the end of this year, Reuters reported.
"I will not be surprised to see world trade stabilize, world industrial production stabilize and start to grow two months from now," Krugman said then, according to Reuters. "I would not be surprised to see flat to positive GDP growth in the United States, and maybe even in Europe, in the second half of the year."
But even if Krugman sees the U.S. economy pulling out of its free fall, he doesn't necessarily foresee a return of soaring growth anytime soon. In his London School of Economics talk, he predicted that "almost surely unemployment will keep rising for a long time and there's a lot of reason to think that the world economy is going to stay depressed for an extended period."
Krugman has grabbed his fair share of headlines lately -- and not just those atop his New York Times columns. He's been locked in a running battle with Harvard historian Niall Ferguson about whether rising long-term Treasury bond yields suggest a nasty bout of inflation could be around the corner. (Here's a story about their sparring from Slate;'s Daniel Gross.) Krugman says no, while Ferguson says yes.
And he won points with liberals and antagonized conservatives with a column last week blaming Ronald Reagan's economic policies for the housing bubble.
Even if Krugman's right that the economy won't slide much further, don't look for an official declaration of the recession's end anytime soon. As Bloomberg News correctly points out, Stanford economist Robert Hall, the chairman of the National Bureau of Economic Research committee that acts as the arbiter of such things, has recently said it was "way too early" to make such a call.
Krugman may have no problem making predictions, but Hall is much more reticent.
Paul Krugman sees the recession ending this summer